By Martin Mou
Alibaba Group Holding Ltd. shares jumped Monday, after China's antitrust regulator slapped a record fine on the e-commerce giant following a monthslong investigation.
Alibaba's Hong Kong-listed shares, which opened 5.5% higher, were recently 7.9% higher at 235 Hong Kong dollars, when most other leading Chinese tech stocks were down.
China's antitrust regulator on Saturday imposed a fine equivalent to US$2.8 billion against Alibaba for abusing its dominant position over rivals and merchants on its e-commerce platforms, coming amid a wave of scrutiny on the business empire of company founder Jack Ma.
What ran afoul of the law was a practice dubbed "er xuan yi" -- literally, "choose one out of two." The regulator said Alibaba punished certain merchants that sold goods both on Alibaba and on rival platforms, and ordered the company to stop unlawful practices.
Alibaba Chairman and Chief Executive Daniel Zhang said Monday that the company doesn't rely on the exclusivity arrangement to retain merchants and the arrangement only covered a certain number of stores.
"So business-wise, we don't expect material negative impact on the change of this arrangement," Mr. Zhang added.
Some analysts say the penalty could put an end to the regulatory uncertainty associated with the antimonopoly investigation into Alibaba that started late last year.
Market concerns about the investigation are likely addressed by the recent decision and penalties from China's State Administration for Market Regulation, Jefferies said, adding that this could foreshow "a new starting point" for Alibaba.
The 18.2 billion yuan fine is equivalent to 4% of Alibaba's domestic annual sales in 2019, according to the regulator. Under Chinese rules, antitrust fines are capped at 10% of a company's annual sales.
Citic Securities thinks this shows the penalty was modest and reflects the regulator's intention of using it as a warning to other tech giants of their potentially monopolistic business practices.
The financial impact of the fine looks manageable for Alibaba, which had a cash pile of more than CNY300 billion as of end-2020, the brokerage said.
Write to Martin Mou at email@example.com
(END) Dow Jones Newswires